9911796707
TMI Blog2024 (10) TMI 1474X X X X Extracts X X X X X X X X Extracts X X X X ..... of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the AO satisfactory. As is not disputed about the source of money wherein the revenue contended that the same whatsapp chat suggest part of the money reflected in the books and part not. Thus, the source of addition made is explained by the assessee and ld. AO has taken a plausible view on the matter. Not only that the amount of addition is disputed and as supported by the seized material it is merely mathematical calculation which is disputed by the assessee and therefore, the case of the assessee is squarely covered by the decision of our High Court in the case of Manna Trust [ 2022 (1) TMI 693 - RAJASTHAN HIGH COURT ] Not only that as regard the chargeability of disclosed income the Gujarat High Court in the case of PCIT Vs. Dharti Estate [ 2024 (1) TMI 1197 - GUJARAT HIGH COU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treatment under the Act. We also note that it was not the case of the revenue on the variation in stock was found, variation in the investment in the assets, no loan taken or given out of books were found and no proof of unaccounted purchase were found. Thus, merely on sum slip found in the whatsapp, addition were made and that cannot be considered as unexplained credit in the hands of the assessee company. It is not a cash of revenue that ld. AO was not aware about the provision of section 115BBE, AO was conscious about the provision of section 115BBE of the Act, because while dealing with the addition of unaccounted cash found for an amount was added and while doing so he invoked the provision of section 115BBE of the Act while dealing with the subsequent year case. Here also while invoking the provision of section 263 there is no variation was proposed in the computation of income of the assessee, but only for rate of tax and that with the facts already on record being disputed and not crystallized the order is neither erroneous nor prejudicial to the interest of the revenue. Not only that as argued by assessee their case is also covered with the decision of M. P. High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in these appeals are almost identical on facts and are almost common, except the difference in figure disputed in each year, therefore, these appeals were heard together with the agreement of both the parties and are being disposed off by this consolidated order. 3. At the outset, the ld. AR has submitted that the matter in ITA No. 922/JP/2024 may be taken as a lead case for discussions as the issues involved in the lead case are common and inextricably interlinked or in fact interwoven and the facts and circumstances of other cases are identical except the difference in the amount in dispute other cases. The ld. DR did not raise any specific objection against taking that case as a lead case. Therefore, for the purpose of the present discussions, the case of ITA No. 922/JP/2024 is taken as a lead case. 4. Before moving towards the facts of the case we would like to mention that the assessee has assailed the appeal in ITA No. 922/JP/2024 on the following grounds; "1. That in law and in the facts and circumstances of the case, the ld. Principal Commissioner of Income-tax grossly erred in initiating & passing an order u/s 263 of the Act and in holding that the assessment order pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That both the emails received from the department carrying the orders passed u/s. 263 got merged in a single email and the computer operator of the assessee's Chartered Accountant due to oversight could not understand that there are two different emails and took the printout of the subsequent order received for assessment year 2019-2020 only and handed over to the assessee's Chartered Accountant for further action. Copy of screen shots are as under: 5. The thereafter assuming that order dated 22.03.2024 has been passed by the ld. PCIT for the assessment years 2019-2020, the assessee asked Shri Siddharth Ranka to file appeal before the Hon'ble ITAT, Jaipur Bench, Jaipur. Accordingly appeal for A.Y. 2019-2020 was filed and the same was heard by the Hon'ble Bench and the order is reserved. 6. That recently the assessee received notices u/s. 142(1) r.w.s. 263 dated 25.06.2024 from the ld. ACIT, Central Circle, Kota for A.Y. 2018-2019 & 2019-2020 in reference to orders passed by the ld. PCIT. At that time the assessee applicant closely checked the email & income-tax portal and got to know that 2 notices dated 12.03.2024 were issued by the ld. PCIT for A.Y. 2018-2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hada Group, Kota" to which the assessee belongs. A number of persons / premises were covered u/s 132 of the Act. Cash, Jewellery and other documents were found and seized from some person's residence and business premises. The case of the assessee was also covered under search proceedings. The assessee filed return of income u/s 139 on 12.09.2018. The assessee also filed return in response to notice u/s. 153A dated 22.01.2021 declaring total income at Rs. 68,18,660/-. There is no difference between ITR filed u/s. 153A and 139 of the Act. Consequently, the case was taken up for scrutiny for A.Ys 2018-19. In the assessment proceeding ld. AO noted that during search operation mobile [iphone] phone was taken in custody and some business related charts were identified in the mobile phone of Shri Jitendra Sadhwani. Print out of total 28 pages of WhatsApp chats of plywood products to various parties by M/s. Sadhwani Wood Products Private Limited. Some payments are in cheque, some partly in cash and cheque and some payments were received in cash only. These transactions were asked to be verified to Shri Jitendra Sadhwani with supporting documents. In reply there to he confirmed that all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash purchase and sale by the assessee company is very clear by the material placed on record. During post search investigation, various other transactions of similar type are also found not recorded in the books of accounts. On the ground of the analysis of incriminating document / material seized / impunded at the time of search / survey proceeding conducted on 01.08.2019 the assessee has also accepted about cash component involved in these transactions as unaccounted in this regard. In the light of the evidences, gathered at the time of search / survey proceedings as well as during the post search investigation it has established that the assessee concern is engaged in making unaccounted cash sales which come to Rs. 141,80,82,030/- the year wise bifurcation determined by the ld. AO is as under Sr. No. F.Y Unaccounted cash receipts on account of unaccounted 1 2012-13 12,79,50,140 2 2013-14 14,32,00,134 3 2014-15 17,22,13,989 4 2015-16 21,95,85,706 5 2016-17 21,24,51,359 6 2017-18 22,40,32,276 7 2018-19 23,38,84,911 8 2019-20 (Till 31.07.2019) 8,47,63,515 1,41,80,82,030/- Considering the above working addition of Rs. 22,40,32,276/- was added in the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32,276/- had been made treating as business income iv) That when a decision has been taken by the Assessing Officer consciously and which is legally correct, the assessment order cannot be said to be erroneous but the action now initiated is just a change of opinion. v) The Reliance has also been placed by the assessee on the following decision • PCIT v/s Manna Trust 2022 Rajasthan High Court • PCIT v/s Dharti Estate 2024 Gujarat high court • And many other orders of the ITAT The ld. PCIT considered all the facts and circumstances as detailed in the reply filed by the assessee but not found the reply convincing and thereby ld. PCIT thus held as under:- "7. I have examined the facts on record and have considered the position of law. The submission of the assessee has been perused carefully & it is observed that the AR of the assessee has in the submission tried to establish that the Assessment order passed by the Assessing Officer is not erroneous but the action now initiated is just a change of opinion hence cannot be subject to the revision u/s 263 of the Income Tax Act, 1961. In this respect, the intent of the legislature behind the section has to be u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urce of unexplained money is the business only. In this regard Reliance is being placed on the decision of the Jurisdiction high court in case of M/s Bajargan Traders, Alwar v/s CIT where in the Honourable jurisdiction High Court decided on the issue of Surrender made on account of excess stock. The Honourable bench of the Rajasathan High Court had upheld the decision of the ITAT. Some of the important facts and observations arising from the judgement of Hon'ble ITAT as reproduced in the judgement Principal Commissioner of Income-tax v. Bajargan Traders [2017] 86 taxmann.com 295 (Rajasthan) are as under:- (i) The first attempt of the assessing authority, give opportunity to the assessee to establish nexus between unexplained investment & the regular source of income and if it is satisfactorily established then first such investment should be considered as undeclared receipt under that particular head. (ii) In a cases where source of investment/expenditure is clearly identifiable AND Alleged undisclosed asset has no independent existence of its own or there is no separate physical identity of such investment/expenditure both above conditions should be met simultaneousl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anation how the unexplained money had been generated, hence the sum of Rs 22,10,32,276/- detected by the Assessing officer is liable to be taxed under the provisions of section 69 A r.w.s 115BBE and cannot be treated as business income. In order to treat such unexplained money as business income the assessee should have explained the complete chain of events, for generation of the unexplained money. Such nexus has not been given by the assessee. Thus it is clear that the assessing officer erred &did not take a conscious decision while taxing the unexplained money generated through cash sales made out of books as business income. Clearly, this error has caused prejudice to Revenue. Being a search/seizure case, it was essential that clarification/explanation of the addition made on account of unexplained money of Rs. 22,10,32,276/- u/s 69A of the Act should have been examined by the Assessing Officer. The tax implication of the same has also not been examined or considered while making the assessment by the AO. 8. Considering all the facts and circumstances of the case and for the reasons discussed above, the assessment order dated 29.09.2021 for A.Y. 2018-19 passed by the AO i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee appellant always cooperated and submitted detailed replies. The assessee appellant in response to show cause notices issued by the ld. Assessing Officer submitted replies dated 17.09.2021. 5. The ld. Assessing Officer vide its assessment order dated 29.09.2021 passed for A.Y. 2018-2019 has made an addition of Rs. 22,40,32,276/- towards unaccounted cash sales as business income of the assessee appellant. The said assessment order has been passed after seeking approval of ld. Additional Commissioner of Income-tax, Central Range, Udaipur u/s. 153D of the Act. The assessee appellant has filed an appeal before the Hon'ble CIT(A) for the illegal addition made by the ld. Assessing Officer and the said appeal is currently pending. 5.1. The ld. Assessing Officer vide its assessment order dated 29.09.2021 passed for A.Y. 2019-2020 has made an addition of Rs. 23,38,84,911/- towards unaccounted cash sales as business income of the assessee appellant. The said assessment order has been passed after seeking approval of ld. Additional Commissioner of Income-tax, Central Range, Udaipur u/s. 153D of the Act. The assessee appellant has filed an appeal before the Hon'ble CIT(A) for the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see company in the audited books of accounts since last years. During post search proceedings, in its written reply assessee accepted that company have purchased goods in cash without billing and sold these items without bills in cash as well. Ratio of unaccounted cash sales with total amount received in the particular transaction was determined by the search team during the search action and a ratio of suppression of sales was established by using weighted average method. A ratio of unaccounted sales of 52.1675782% comes on the ground of this method that is M/s Sadhwani Wood Products Pvt. Ltd's unaccounted sale of current year and last 6 financial years and same has not been recorded in its books of accounts. The final amount was calculated at Rs. 141,80,82,030 for F.Y. 2012-13 to 31.07.2019 on the basis of evidences gathered as per table at page no. 6 of the statement. It has become crystal clear that the assessee concern M/s Sadhwani wood products Pvt. Ltd. is in practice of making unaccounted sale specially cash sale or cash component involved in the transaction has not been recorded by the assessee concern in their books of accounts. At the time of the search as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer were to be anywhere near to be true then the department would have at-least found some fraction of undisclosed profits as undisclosed assets in the nature of Jewellery, Ornaments, Loans & Advances to Persons, Stock-mismatch, Investment in Immovable Properties, etc. BUT no such unaccounted investment / asset was found, nor was any addition made on that account. • during the course of search, which comprises of total 16 individual members, i.e., 4 male adult members, 4 female adult members (married), 2 female adult members (divorcee), 4 female minor members and 2 male minor members the total jewellery including silver articles was found to the tune of 3,319 grams only which's market value at that time was equivalent to Rs. 1,11,46,377/- and out of which jewellery worth Rs. NIL was seized by the income tax department. Further during the course of assessment proceedings, the said jewellery & ornaments found was duly explained in the hands of various persons and no addition was made by the Id. Assessing Officer. • during the course of search total stock-in-hand as found recorded in the books of accounts of the assessee was of Rs. 8,63,80,961/- whereas the value o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - and out of which cash of Rs. 30,00,000/- was seized by the income tax department. Furthermore during the course of assessment proceedings, the assessee vide letter dated 17.09.2021 voluntarily offered a sum of Rs. 2,10,600/- [3869500 - 3658900] for tax in A.Y. 2020-2021 towards unexplained cash-in-hand found at the time of search. However, the ld. Assessing Officer made an addition of Rs. 4,17,627/- and taxed the same u/s. 69A r.w.s. 115BBE of the Act. • Relevant extracts of letter dated 17.09.2021 filed by the assessee is also reproduced as hereunder: 12. That thus out of Rs. 38,69,500/- found by the search officials a sum of (Rs. 7,15,128/-, Rs. 1,54,372/- & Rs. 35,187/- + Rs. 1257/- + Rs. 1,32,821/-) totalling Rs. 10,38,765/- and (Rs. 23,19,935/- & Rs. 3,00,200/-) totalling Rs. 26,20,135/- gross totalling (1038765 + 2620135 = 36,58,900/-) should be deemed to be fully explained and no adverse view should be adopted towards the same. 13. That the cash-in-hand which was found excessive should be subjected to normal business profit and not u/s. 115BBE of the Act and we wish to rely upon the following authorities: • Hon'ble ITAT, Jodhpur Bench in case of Lovish Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 154 of the Act. Accordingly, the impugned order is set aside and it is held that the provisions of sect ion 154 of the Act were not applicable in the present case and the Assessing Officer was not justified in making the rectifications u/s 154 of the Act. • Hon'ble ITAT, Lucknow Bench in the case of Kanpur Organics Pvt. Ltd. v. DCIT (2020) 3 TMI 279 has held: Taxation of income - whether the surrendered amount can be taxable under section 115BBE read with section 69A of the Act or it was to be taxed as a regular business receipt - HELD THAT:- To decide this issue, it is important first to visit the statement of the director of the assessee which was recorded during the course of survey. We have particularly gone through the answer to question No. 35 wherein the director of the assessee has clearly stated that the figures noted in the diary represented sales unrecorded in the books of account and these figures related to the period April 2015 to August 2015. In the present case, the addition under section 69A could have been made only if no explanation, regarding source of such income, was offered or the explanation offered by the assessee was not satisfactory in the opi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus where the assessee appellant was found to be the owner of undisclosed money the ld. Assessing Officer has consciously treated the same as taxable u/s. 69A of the Act and where the addition made by him did not correlate with the undisclosed money the same is consciously treated by as income from business income and thus the same was taxable @ normal rates as has been done by him in other assessment years. The ld. Assessing Officer has specifically held that the income being added by him towards unaccounted cash sales is being added as business income. If the income has been consciously added as business income, then there is no scope for invoking the same as income from other source and in turn invoke provisions of section 115BBE of the Act. 15. The ld. Assessing Officer was undertaking assessment proceedings of the assessee appellant and also of its group entities and not only for the year under consideration but for all the relevant assessments as referred hereinabove. The nature of addition made by the ld. Assessing Officer against the assessee on account of unaccounted cash sales which is in the nature of business income and not in the nature of income from other sources ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... query made by this Court whether order passed by the Pune Bench in the case of Ramamoorthy Vasudevan (supra) was challenged before the High Court or Supreme Court on the issue of jurisdiction under Section 263 of the Act. Learned counsel submits that she could not lay her hands any order / judgment passed by the High Court as well as by the Supreme Court on this issue. In the case of Ramamoorthy Vasudevan (supra), in a similar facts and circumstances, reliance has been placed on judgments delivered by the Pune Bench of Tribunal in the case of Dhariwal Industries Limited v/s CIT (ITA No.1108 to 1113/PUN/2014), Lucknow Bench in the case of Mehtab Alam v/s ACIT (ITA Nos.288 to 294/Lkw/2014), Hyderabad Bench of the Tribunal in the case of CH. Krishna Murthy v/s ACIT (ITA No.766/Hyd/2012) and one of the judgment passed by the High Court of Judicature at Allahabad in the case of CIT v/s Dr. Ashok Kumar (ITA No.192 of 2000) and Hyderabad Bench of Tribunal in the case of M/s Trinity Infra Ventures Limited v/s DCIT (ITA No.584/H/2015) and consistently held that once the order under Section 143(3) r/w section 153A of the Act has been passed after taking prior approval of the ACIT under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner in respect of each assessment year referred to in clause (b) of [sub-section (1) of] section 153A or the assessment year referred to in clause (b) of sub-section (1) of section 153B, except with the prior approval of the Joint Commissioner:] 18.1. Now, on perusal of the above Section which states that a prior approval is necessary for assessment in case of assessment search or acquisition, it is specifically mentioned that no order of assessment or re-assessment shall be passed by an Assessing Officer below the rank of JCIT except with the prior approval of the Joint Commissioner. Before us, the ld. Counsel for the assessee stated that for the search assessment cases whatever seized material are found belonging/pertaining to the assessee, a copy of complete set is also kept with the authority who has to provide the approval of the assessment or re-assessment. He also stated that during the course of assessment proceedings, the ld. Assessing Officer has to update about the proceedings to his senior who has to finally grant the approval u/s 153D of the Act. Even after preparati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. D.R. has, however, relied upon the Order of ITAT, Panaji Bench, but, has not explained whether the Judgment of Hon'ble Allahabad High Court in the case of Dr. Ashok Kumar (supra) or different Benches of the Tribunal have been considered in this case by the Panaji Bench. It is not decided in this case that assessment order cannot be revised without revising the approval under section 153D of the I.T. Act and Explanation 1 to section 263 of the I.T. Act has also not been considered. Therefore, this decision relied upon by the Ld. D.R. would not apply to this case. Further the Judgment in the case of Param Transport (P.) Ltd. (supra), of Hon'ble Chhattisgarh High Court (supra) is not with regard to approval obtained under section 153D of the I.T. Act because in this case it was held that revisional power under section 263 of the I.T. Act is applicable to assessments under search and seizure. However, it is not explained by the Ld. D.R. whether in this case the approval under section 153D have been revised by the Learned PCIT. It may also be noted that it is well settled Law that if two views are possible, then the view which is in favour of the assessee should be made app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. 14. We find merit in the above submission of the Ld. Counsel for the assessee. We find the Lucknow Bench of the Tribunal in the case of MehtabAlam Vs. ACIT vide ITA Nos.288 to 294/Lkw/2014 order dated 18-11-2014 while deciding an identical issue has observed as under. 14.1 We find the Hyderabad Bench of the Tribunal in the case of CH. Krishna Murthy Vs. ACIT vide ITA No.766/Hyd/2012 order dated 13-02- 2015 following the decision of the Lucknow Bench of the Tribunal in the case of MehtabAlam (Supra) held that CIT is not justified in assuming jurisdiction u/s. 263 when the order has been passed in terms of section 153D of the Act. 14.2 We find the Hyderabad Bench of the Tribunal in the case of M/s. Trinity Infra Ventures Ltd. (Supra) had an occasion to decide an identical issue and it held that the assessment order approved by the Addl. CIT u/s. 153D cannot be subject to revision u/s. 263 of the I.T. Act. iv. Trinity Infraventures Ltd. v. Dy. CIT [IT Appeal Nos. 584-589 (Hyd.) of 2015, dated 4-12-2015] 5.4. The Ld. Counsel for the assessee has further submitted that the assessment under section 143(3) read with section 153C was passed after getting approval of A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21 towards unaccounted cash sales as business income of the assessee appellant viz-a-viz 263 invoked by PCIT is as follows: Assessment Year Assessment Order 263 Invoked 2018-2019 29.09.2021 YES 2019-2020 29.09.2021 YES 2020-2021 29.09.2021 NO 19.1. If the assessment order for A.Y. 2018-2019 has been found to erroneous & prejudicial to the interest of revenue, how come, assessment orders for A.Y. 2020-2021 where similar nature of additions were made by the ld. Assessing Officer were not found to be erroneous & prejudicial to the interest of revenue. Thus while invoking provisions of section 263 in the instant case, the rules of consistency has been given a complete bypass which is impermissible. Reliance is placed upon: • Hon'ble Supreme Court in Radha Soami Satsang v. CIT (1991) 11 TMI 2 has observed: We are aware of the fact that, strictly speaking, res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings as the said addition is completely based on pure guesswork, conjectures & surmises and without finding any underlying undisclosed asset against the assessee. Where the assessee was found to be the owner of undisclosed money the ld. Assessing Officer has consciously treated the same as taxable u/s. 69A of the Act and where the addition made by him did not correlate with the undisclosed money the same is consciously treated by as income from business income and thus the same was taxable @ normal rates as has been done by him in other assessment years. The ld. Assessing Officer has specifically held that the income being added by him towards unaccounted cash sales is being added as business income. If the income has been consciously added as business income, then there is no scope for invoking the same as income from other source and in turn invoke provisions of section 115BBE of the Act. 23. That it is trite that the exercise of power u/s. 263 of the Act is ousted in case of a debatable issue. An assessment order can be termed as erroneous and prejudicial to the interest of the Revenue, if the Assessing Officer has taken a view which is not legally tenable. Per contra, if t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue has a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. For example, when an Assessing Officer adopted one of the courses permissible in law and it has resulted in loss of revenue or where two views are possible and the Assessing Officer has taken one view with which the CIT did not agree with, it cannot be treated as an erroneous order prejudicial to the interest of the revenue because the view taken by the Assessing Officer is unsustainable in law. 26. The ld. Assessing Officer has examined that issue as it is evident from the queries posed and replies filed by the assessee appellant. Since, in this case ld. Assessing Officer has clearly conducted the enquiry and revenue did not pin point the error on the part of the ld. Assessing Officer to that extent, the assessment order passed after due application of mind cannot be subjected to proceeding u/s. 263 of the Act. 27. The ld. Assessing Officer while framing the assessment has taken a possible view and the show cause notice u/s. 263 does not demonstrate the error remained on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cided against revenue. • Hon'ble Madhya Pradesh High Court in PCIT v. Krishna Kumar Verma (2024) 3 TMI 1018 has held: Undisclosed income surrendered during the Search and Seizure action - to be taxed at normal rate or tax rate stipulated u/s 115BBE of the Income Tax Act - ITAT confirming the Order of CIT(A) that the undisclosed income surrendered during the Search and Seizure action, is liable to be taxed at normal rate instead of the tax rate stipulated under Section 115BBE of the Income Tax Act? - HELD THAT:- From a bare reading of the Section, it is apparent that an appeal to the High Court from a decision of the Tribunal lies only when a substantial question of law is involved, and where the High Court comes to the conclusion that a substantial question of law arises from the said order, it is mandatory that such question(s) must be formulated. The expression "substantial question of law" is not defined in the Act. Nevertheless, it has acquired a definite connotation through various judicial pronouncements. A finding of fact may give rise to a substantial question of law, inter alia, in the event the findings are based on no evidence and/or while arriving at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws are possible and AO has taken one view with which the PCIT does not agree, it cannot be treated as an erroneous order and it is prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law. We draw strength from case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC) and also from the case of CIT vs. Max India Ltd. (2007) 295 ITR 282 (SC). • Hon'ble ITAT Chandigarh Bench in Tarlochan Singh v. DCIT (2024) 1 TMI 795 has held: Nature of Income as surrendered during survey proceedings - surrendered amount as "business income" OR "deemed income" i.e income from undisclosed sources - CIT (Appeals) sustained the surrendered amount u/s 68 of credit entry and u/s 69 of excess stock - appellant contended that surrendered amount represents the "business income" as the appellant has no other source of income. Whether deeming provisions of Section 68 can be invoked in respect of amount introduced in the capital account of the assessee and found credited during the course of survey in the books of accounts of the assessee? - HELD THAT:- The Survey team had asked a specific question to the assessee d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the normal rate of tax. • Hon'ble ITAT Amritsar Bench in Deepak Setia v. DCIT (2023) 9 TMI 942 has held: Addition of income u/s 69A or Business income - surrender of income during survey proceedings - Charge tax as per provisions of Section 115BBE - HELD THAT:- During survey proceeding the assessee surrendered total income of Rs. 29 lacs out of which amount was related to other discrepancies/miscellaneous business income which was treated as income u/s 69A and calculated tax under special rate during assessment. There entire addition is certainly without forming proper basis for conversion into business income to non-business income. The revenue was not able to submit any evidence during assessment and appeal proceeding that the said income is not connected with the business income of the assessee or accumulated from non-recognising source. Hence, when all the incomes earned by the assessee are only from the business income of the assessee, there do not arise any question as to application of provisions of section 69A and hence taxing such income at special rate as per section 115BBE is improper. It is a settled principle in law that when there is no other/separate source of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with any specific asset and the difference should thus be treated as undeclared business income. Following the said decision of DCIT Vs. Shri Ram Narayan Birla [2016 (9) TMI 1354 - ITAT JAIPUR] has taken a similar view holding that the excess stock so found during the course of survey was part of the stock and the Revenue has not pointed out the excess stock has any nexus with any other receipts other than the business being carried on by the assessee. The surrender on account of advances were relating to the business being carried on by the assessee. The ld CIT(A) has also returned a finding that the advances were admitted as being related to business activity of the assessee. Where the same has been found unrecorded in the books of accounts, the same has to be brought to tax under the head "business income". Thus the income surrendered during the course of survey cannot be brought to tax under the deeming provisions of section 69 and 69A of the Act and the same has been rightly offered to tax under the head "business income". In absence of deeming provisions, the question of application of section 115BBE doesn't arise for consideration. Decided in favour of assessee. • Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oneous. We therefore find that merely stating that there was survey operation at the business premises of the assessee and provisions of Section 115BBE of the Act are attracted, the same can be a basis for exercise of jurisdiction u/s 263 of the Act. In view of the same, order so passed by the Ld. Pr. CIT under section 263 is set aside and that of the AO is restored. Appeal of assessee allowed. • Hon'ble Jurisdictional ITAT Jaipur Bench in Rekha Shekhawat v. PCIT (2022) 8 TMI 791 has held: Revision u/s 263 - Addition u/s 68 - income from other source (income declared at the time of survey) - tax is payable u/s 115BBE or not - recovery of cash amount of advances made by the assessee to the other persons for purchase of land / plots and thus comes under the purview of section 68 or not - HELD THAT:- Additional income was in the nature of business income and don't fall under Sec. 68 and/or Sec. 69 of the Act and consequently therefore, Sec.115BBE could not have been invoked. In view of the above discussion, therefore, we are of the considered view that the CIT was not at all justified by invoking the provisions of Sec. 263 by wrongly/incorrectly holding that the subjected asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roneous and prejudicial to the interest of Revenue after referring to the explanation 2 of section 263 of the Act. To tax any item of income/ expenditure, unaccounted investment at the specific rate r.w.s. 115BBE of the Act, it is necessary to classify the income under the head deeming provision under section 69, 68, 69B etc. In the present case, the income surrendered was to be classified u/s 69 - As per the direction of the Ld. PCIT, however, we find that the Ld. PCIT has nowhere pointed out any contravention that the income surrendered by the assessee falls within the provision of section 69 of the Act. As such, the assessee in the present case was able to justify the source of income surrendered during survey operation and therefore we are of the view that the same cannot be treated as deemed income u/s 69 of the Act. Once the income goes out of the preview of the deeming provision, the provision of section 115BBE of the Act, cannot be applied. We note that the AO has taken one of the impossible view by treating the income offered during survey operation as income under the head business and profession. The Ld. PCIT cannot substitute the view taken by the AO as per his understa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble ITAT Chandigarh Bench in Ravinder Kumar Bansal v. PCIT (2023) 12 TMI 716 560-582 18 Hon'ble Jurisdictional ITAT Jaipur Bench in Rekha Shekhawat v. PCIT (2022) 8 TMI 791 583-599 19 Hon'ble ITAT Rajkot Bench in Vaidya Realities v. PCIT (2024) 1 TMI 970 600-609 Index Sno. Particulars Pages 1 Written Submissions before Hon'ble ITAT 01-29 2 Copy of Show Cause Notice dated 12.03.2024 issued by the ld. Principal Commissioner of Income-tax u/s. 263 of the Act 30-31 Index- II Sno. Particulars Pages 20 Written submissions before Hon'ble ITAT 610-639 21 Hon'ble Madhya Pradesh High Court in PCIT v. Prakhar Developers Pvt. Ltd. (2024) 4 TMI 498 640-642 22 Hon'ble ITAT Patna Bench in Gyan Infrabuild Pvt. Ltd. vs. PCIT (2024) 5 TMI 732 643-658 12. Ld. AR appearing on behalf of the assessee in addition to the written submission so filed vehemently argued that the only issue in the present appeal is the chargeability of rate of tax on the addition so made. Ld. PCIT did not find error or prejudiced with the quantum and the manner the assessment proceeding is carried out by the ld. AO and thereby ld. PCIT initiated the proceeding just to amend the ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unaccounted purchase were found. Thus, merely on sum slip found in the whatsapp addition were made and that cannot be considered as unexplained credit in the hands of the assessee company. It is not a cash of revenue that ld. AO was not aware about the provision of section 115BBE, AO was conscious about the provision of section 115BBE of the Act, because while dealing with the addition of unaccounted cash found for an amount of Rs. 4,17,627/- was added and while doing so he invoked the provision of section 115BBE of the Act. Here also while invoking the provision of section 263 there is no variation was proposed in the computation of income of the assessee, but only for rate of tax and that with the facts already on record being disputed and not crystallized the order is neither erroneous nor prejudicial to the interest of the revenue. To drive home to the contention ld. AR of the assessee relied upon the decision of M. P. High Court in the case of PCIT Vs. Prakhar Developers P. Ltd., [4 TMI 498 ] wherein the Hon'ble High Court has held that once order has been passed taking prior approval then again invoking the provision of section 263 was not correct. Similar view was taken by P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1961 was carried out on 01.08.2019 at the various premises of "Sadhwani & Rohada Group, Kota" to which the assessee belongs. A number of persons / premises were covered u/s 132 of the Act. Cash, Jewellery and other documents were found and seized from some person's residence and business premises. The case of the assessee was also covered under search proceedings. Assessee filed return of income u/s 139 on 12.09.2018. Pursuant to search notice u/s. 153A of the Act was issued on 22.01.2021 and in response assessee filed return on 06.02.2021 declaring income of Rs. 68,18,660/-. There is no difference between the ITR filed u/s. 153A and 139 of the Act. Based on the documents found, assessment proceeding were initiated and required notices were issued to the assessee and were complied. The assessment order was passed on 29.09.2021 as per provision of section 143(3) r.w.s. 153A of the Act. While proceeding for assessment as we note from the order of the assessment that ld. AO noted that during search operation mobile [iphone] phone was taken in custody and some business related charts were identified in the mobile phone of Shri Jitendra Sadhwani. Print out of total 28 pages of Whats ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t read with the evidences found ld. AO noted that assessee company is regularly engaged in out of books cash sale of plywood items. Most of the plywood items purchased in out of books in cash from local companies and no accounting of these transactions were made by the company. Ld. AO noted that the modus of out of books of cash purchase and sale by the assessee company were happening which was very much clear by the seized material placed on record. 15. During post search investigation, various other transactions of similar type are also found not recorded in the books of accounts. On the ground of the analysis of incriminating document / material seized / impounded at the time of search / survey proceeding conducted on 01.08.2019 the assessee has also accepted about cash component involved in these transactions as unaccounted in this regard. In the light of the evidences, gathered at the time of search / survey proceedings as well as during the post search investigation it has established that the assessee concern is engaged in making unaccounted cash sales which come to Rs. 141,80,82,030/- the year wise bifurcation determined by the ld. AO and the related unaccounted cash sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey generated though cash sales made out of books as business income. Clearly this error has caused prejudice to revenue and accordingly she hold that the order of the AO is therefore, liable to revision under the explanation (2) clause (b) and clause (a) of section 263 of the Act. The ld. PCIT also hold a view that she is passing an order for initiation to tax unexplained money of Rs. 22,10,32,276/- generated by assessee at special tax rate u/s. 115BBE of the Act. 18. Assessee challenges that finding of ld. PCIT before us contending that the only issue in the present appeal is the chargeability of rate of tax on the addition so made. Ld. PCIT did not find error or prejudiced with the quantum and the manner the assessment proceeding is carried out by the ld. AO. Ld. PCIT merely initiated proceeding just to amend the rate of tax to be charged on the disputed addition. As we note that the addition has been made by making the extrapolation and no clear finding on facts of undisclosed amount. As there is no clear material which is to be charged at special rate merely the inference about the sales based on the those seized record taking weighted average will not suggest that the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction for the relevant years, higher tax rate is required to be charged. 20. Thus, when the order passed by the ld. AO is perfectly dealing with the issue and there is no error or prejudice as such ld. PCIT cannot invoke the provision of section 263 just to say different rate of levy of the tax when ld. AO was already aware about the issue on hand of cash sales. 21. Now coming to the provisions of explanation 2 of section 263 of the Act, ld. PCIT should have at list satisfied herself before invoking the provisions, that in fact the assessee is found to be the owner of any money, bullion, jewellery or other valuable article the answer is no even the quantification of cash sales is on extrapolation of taking weighted average of sales based on the instances found at the time of search and the assessee challenged the finding of the ld. AO. Thus, the addition made by the ld. AO being under disputed and while making the addition the ld. AO has not discussed or referred the section 69A of the Act the ld. PCIT cannot hold here view when that of the view of the ld. AO when the ld. AO has consciously added the said sum as business income. Thus, Explanation 2 cannot be used for such a manne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roneous nor prejudicial to the interest of the revenue. Not only that as argued by the ld. AR of the assessee their case is also covered with the decision of M. P. High Court in the case of PCIT Vs. Prakhar Developers P. Ltd., [4 TMI 498 ] wherein the Hon'ble High Court has held that once order has been passed taking prior approval then again invoking the provision of section 263 was not correct. Similar view was taken by Patna High Court in Gyan Infrabuild P. Ltd. Vs. PCIT [5 TMI 732 ]. Ld. PCIT on the same very issue out of other year selected only for two year and other order on the same very issue could not found the order erroneous and has not proposed any action when the nature of addition being same. AO has already invoked the provision of section 11BBE for A. Y. 2020-21 while dealing with the addition and while making cash sales addition he has taken a conscious decision not to invoke that provision. Even the view and the addition being debatable and the matter was under dispute before ld. CIT(A) ld. PCIT should not considered merely on the charge of rate of tax order as prejudicial and that too without proving that it was in fact erroneous or prejudicial to the interest of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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